A NOW account, short for Negotiable Order of Withdrawal account, let customers earn interest on money they could use through checks or drafts. It mattered before banks were allowed to pay interest on ordinary checking accounts. Federal banking changes removed that distinction, so the product is now rarely offered.
How NOW accounts fit into banking history
For decades, federal rules barred banks from paying interest on demand deposit accounts, the kind of account customers could draw on whenever they needed cash. The restriction grew out of concerns during the Great Depression, when bank failures and fierce competition for deposits raised questions about interest payments and bank profits.
As rates climbed in the 1950s, banks looked for ways to attract customers without openly paying interest on checking balances. Some offered practical perks, including more branches and convenient services, or gave away consumer goods. Other approaches created indirect value, such as preferred loan rates tied to deposit balances or low charges for services such as check clearing.
Ronald Haselton, then president and chief executive of Consumer Savings Bank in Worcester, Massachusetts, developed the NOW account as a formal challenge to the restriction. Congress authorized the accounts in Massachusetts and New Hampshire in 1974. In 1976, availability spread across New England, with interest capped at 5 percent and a seven day advance notice requirement.
NOW accounts became available nationwide in 1980. Congress removed the 5 percent ceiling in 1986, helping bring about Super NOW accounts, which could pay more interest than regular NOW accounts. The seven day notice provision remained a defining feature, although not every bank required customers to use it.
The major change came through the Dodd Frank Act, passed in 2010 after the financial crisis. Its repeal of Regulation Q took effect in 2011, ending the ban on interest payments for demand deposits. Banks could then design interest paying checking products without relying on a separate NOW account category.
NOW accounts compared with today’s cash options
NOW accounts are not technically prohibited, but their former advantage disappeared. Consumers comparing places to keep accessible cash can look at checking accounts, high yield savings accounts, money market accounts and certificates of deposit. The right comparison depends on how quickly the money needs to be available and what conditions come with the advertised return.
| Account type | Access and interest | Trade offs to check |
|---|---|---|
| NOW account | Historically paid interest while allowing drafts against funds. A seven day notice period was its key distinction. | Rarely offered today. The notice period could make access less immediate, and banks did not always invoke it. |
| Checking account | Designed for routine payments and withdrawals. Some accounts pay interest. | Accounts with relatively high rates may require a minimum balance, recurring direct deposits or debit card use. |
| High yield savings or money market account | Both are options for earning a return on liquid funds. | Compare the account’s access rules, balance conditions and fees with your expected use. |
| Certificate of deposit | Another place to hold cash while seeking a return. | Check how the account’s access terms fit the timing of your cash needs. |
The table reflects product differences described in general terms, not current offers. No current rates or fee schedules are available here, so compare the bank’s latest disclosures before opening an account. An advertised rate alone does not show whether you can qualify for it or keep it without changing how you bank.
What to check before choosing an account
Start with access. Demand deposit accounts are built for withdrawals without advance notice, while NOW accounts historically carried a possible seven day notice rule. If bills, purchases or transfers depend on immediate access, read the current account terms rather than assuming that an older NOW account feature applies to every modern product.
Next, check the requirements attached to any interest rate. Banks that offer higher relative returns on checking may ask customers to maintain a specified balance, receive routine direct deposits or use a debit card. Those conditions can matter more than the headline rate if they are difficult to meet consistently.
Then look at fees and the way the account handles common activity. The source material does not provide fee amounts or present day rates, so there is no sound basis for naming a best paying account here. Instead, compare the bank’s current fee schedule, rate terms, minimum balance rules and any limits on withdrawals or transactions. Ask whether the quoted rate applies to the whole balance or only part of it.
Eligibility can also differ by institution and product. The historical account was available through banks and similar deposit taking institutions, but that does not establish who qualifies for a particular account today. Check the provider’s application rules, account opening requirements and any conditions for earning interest before moving money.
For a practical comparison, write down how often you need to access the money, whether direct deposit is convenient, and what balance you can maintain. Then compare two or three current accounts using the same balance and usage assumptions. This helps reveal whether an interest offer comes with requirements that do not fit your routine.
Does a NOW account still offer a distinct benefit?
For most customers, the historic reason to seek a NOW account no longer applies: ordinary checking accounts may now pay interest. The account itself has not been formally outlawed, but the regulatory change removed the difference that once made it useful. A current comparison of rates, access terms and conditions is more relevant than the old product label.
